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Rhapsody says Apple subscriptions anti-competive, may sue

updated 07:10 pm EST, Tue February 15, 2011

by MacNN Staff

Rhapsody may exit iPhone or sue due to iTunes subs

Rhapsody today said Apple's new iTunes subscription rules were likely to force it out of the App Store and could lead to more. It called the plan to mandate iTunes in-app purchases "economically untenable" as it couldn't afford giving Apple 30 percent on top of its existing service. The music streaming service said it planned to collaborate with "market peers" and hinted it might sue to force Apple to compete fairly.

The companies will be "determining an appropriate legal and business response to this latest development," Rhapsody said.

Its service would be explicitly banned since it drops out to Safari to handle subscriptions. The ban could have wide-ranging repercussions for virtually every paid Internet radio service that has a subscription option so far, including Rdio and Slacker. Most of the alarm has so far been raised around magazines and newspapers.

Legal experts, however, have said that the plans might run afoul of antitrust laws. A successful definition of competition along the lines of mobile devices or specifically to digital media could make the argument that Apple is unfairly squeezing out competition to iTunes in music, books and other categories.

If Apple gained a majority of the digital subscription market, "then you might move into territory where an antitrust challenge would seem feasible," University of Iowa antitrust professor Herbert Hovenkamp told the Wall Street Journal.

Apple has been known to loosen rules when it faces serious government intervention. Its loosening of iOS development rules is widely known to have been prompted after the FTC began investigating the fairness of excluding Adobe's Flash CS5 and other non-Apple programming kits. The company has typically been more responsive than Microsoft and has usually avoided fines so far.

TOTAL_COMMENTS Comments

Earth to Rhapsody: You are competing on exactly the same rules as the other third-party subscription services that rely on Apple's infrastructure to gain access to market. You can't survive, but others can? Gee--that's too bad.

If users can get a product from Apple, such as say.. the iPhone, and run the software -- even the freebees -- then they will be happy enough to recommend the device to their friends, coworkers, etc. who will no doubt buy songs, rent movies, subscribe to App store features and all the other goodies associated with providing a great product.

Halo effect for other Apple products? Undoubtably.

Here's an idea, Apple. Charge 30% more to go through the app store for subscriptions than the external subscription sites charge. That would be more honest and reasonable for everyone. Those desiring the convenience of the App store will likely pony up the additional dough. If the product is compelling, then you have a win all the way around.

Apple is not forcing you to put all your subscriptions through iTunes, only transaction from those customers that want the convenience of one-stop shopping. You can still use your current model if you supply the iTunes option. You are not entitled to freeload on the investment and effort of others.
If you are giving your application away for free and handling your own subscriptions, Apple cannot make any money from your transactions while supplying you with a free infrastructure to distribute and update your product. The antitrust seems to be going in the other direction where the freeloaders will pay others to sell their product but only want to do business with Apple if Apple provides it for free.

in my opinion. Apple is a) not blocking vendors from offering out-of-app subscriptions, and as far as I know they could even offer a discount for out-of-app subscriptions -- and b) has no power to stop let's say Google or Microsoft from setting up their own such systems and offering publishers a better deal.

I'm not letting Apple entirely off the hook here -- from the way the story has been reported so far, they're definitely strong-arming (or perhaps setting a position from which to negotiate) -- but I don't think there's a legal challenge here. Other companies will create alternatives if this one is deemed to unfair, and publishers have every right to say "no" if they don't like the terms without any repercussion for other ventures or apps involving the Apple eco-system.

Just a thought, Apple never said that you have to have in app purchasing of subscriptions, they are just making it so that if you offer a button to purchase in your app from the web that you also offer the opportunity to purchase using your apple id from the app store.
Now this in no way means that Amazon, Rhapsody and other companies that offer subscription services could not just give you instructions to go to companies website and create your own account and purchase that way. They are not blocking these companies from making money, I mean after the buy a subscription from Rhapsody how many times do you need to use the in app purchasing? These subscription services all rely on the fact that once you subscribe, we being the lazy human’s that we are, are not going to want to deal with re upping every month, it’s called auto-renew.

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